October 26, 2016

A. Schulman Reports Fiscal 2016 Fourth Quarter, Full-Year Results

- On a GAAP basis, Company reported a $401.7 million non-cash asset impairment charge primarily related to the Citadel acquisition and a net loss for fiscal 2016 fourth quarter and full year of $385.1 million and $364.6 million, respectively
- Delivered adjusted net income, excluding certain items, for the fiscal 2016 fourth quarter and full year of $13.7 million and $61.2 million, respectively
- Reduced total debt by $111 million in fiscal 2016 with strong cash flow
- Company targets fiscal 2017 adjusted earnings guidance of $2.08 to $2.18 per diluted share

AKRON, Ohio, Oct. 26, 2016 /PRNewswire/ -- A. Schulman, Inc. (Nasdaq: SHLM) today announced earnings for the fiscal 2016 fourth quarter and full-year results for the year ended August 31, 2016.

Consolidated net sales for the fiscal 2016 fourth quarter were $604.6 million, compared with $674.0 million in the same prior year quarter. Net sales fell 8.3% after adjusting for $13.4 million of unfavorable foreign currency translation. Adjusted gross margin in the fiscal 2016 fourth quarter, as a percent of net sales, dropped slightly to 16.1% compared with 16.2% in the prior year period. Adjusted operating margin at 5.6% was 50 basis points below the prior year period. Fourth quarter adjusted EBITDA was $53.9 million, compared to $61.7 million in the prior year period. 

On a GAAP basis, the Company experienced a fourth quarter net loss of $385.1 million, or $13.12 per share, due to a non-cash asset impairment charge primarily related to the fiscal 2015 Citadel acquisition. On an adjusted basis, excluding certain items, the Company generated net income of $13.7 million or $0.47 per diluted share in the fiscal 2016 fourth quarter.

Europe, Middle East and Africa ("EMEA") net sales were $299.2 million, down 6.7% excluding unfavorable foreign currency translation of $5.6 million. EMEA adjusted gross profit was $41.9 million. Excluding currency translation, this led to a gross margin of 13.9%, up 40 basis points, due to improved product mix. 

Net sales for the U.S. and Canada ("USCAN") were $158.9 million, down 18.6%. This volume-driven weakness was broad-based and impacted a majority of the Company's business units. USCAN adjusted gross profit was $25.2 million, or a gross margin of 15.9%, compared with 17.4% in the prior year period. 

Latin America's ("LATAM") net sales for the quarter were $44.9 million. Excluding unfavorable foreign currency translation of $5.9 million, net sales rose 12.2%. This was the fifth consecutive quarter of double-digit revenue growth. LATAM delivered adjusted gross profit of $9.7 million, for a gross margin of 21.8%, excluding currency translation, level with the prior year period. 

Asia Pacific ("APAC") reported net sales of $49.3 million, up 3.2% excluding a slight foreign currency headwind. APAC adjusted gross profit was $8.1 million, leading to a gross margin of 16.5%, up 270 basis points from the prior year period, supported by favorable product mix trends and the transfer of lower margin business into a minority owned joint venture. 

Engineered Composites ("EC") net sales for the quarter were $52.3 million, down 8.5%. EC gross profit for the quarter was $12.5 million, for a gross margin of 23.9%, down 150 basis points, negatively impacted by the weaker oil field services activity. 

Working Capital/Cash Flow 
Cash provided from operations was $148.1 million in the twelve months ended August 31, 2016, which was more than double the prior year level. Working capital days were lower at 48 days at fiscal year-end 2016, an improvement from 53 days in the prior year. The cash flow was used to reduce total debt by $111 million in fiscal 2016, to a net leverage ratio slightly below 4.0x. Since the purchase of Citadel in mid-2015, the Company has paid down $175 million of debt.

Capital expenditures for fiscal 2016 were $51.2 million compared with $42.6 million last year. These expenditures were primarily related to the Company's new facilities in Turkey and China as well as additional lines in Germany, China and Mexico. During the year, the Company declared and paid quarterly cash dividends to common shareholders of $24 million, or $0.82 per common share. An additional dividend of $7.5 million was paid to holders of the convertible special stock. 

Full-Year Results
Net sales for fiscal 2016 were $2.5 billion, compared with $2.4 billion in the prior year. Fiscal 2016 net sales results included a negative foreign currency translation of $117.2 million. 

Adjusted gross profit for the year was $413.3 million, and operating income was $146.0 million, compared with $366.2 million and $120.7 million, respectively, in fiscal 2015. Excluding the Citadel acquisition and negative currency translation, this performance led to a gross margin of 16.1% and an operating margin of 5.8%, each improved by 80 basis points. Fiscal 2016 incentive-based compensation expense was $13.8 million lower, or $0.36 per diluted share, as compared with the prior year, based on the Company's operating performance. Adjusted EBITDA improved to $228.9 million, a $49.3 million increase from fiscal 2015 primarily driven from the full year impact of the Citadel acquisition.

Adjusted net income for fiscal 2016 was $61.2 million, or $2.08 per share, which exceeded the Company's previously stated guidance range of $1.90 to $1.95 per diluted share. These compare with $69.9 million, or $2.37 per share in the prior year period.  On a GAAP basis, the Company reported a net loss of $364.6 million, or $12.44 per share, due to the aforementioned impairment charge. 

Lucent Update
As previously reported, the Company identified quality reporting issues affecting certain product lines at two former Citadel manufacturing facilities that were once part of Lucent Polymers, which was acquired as part of the Citadel acquisition. Specifically, the Company discovered discrepancies between laboratory data and certifications provided by Lucent to customers with respect to certain products using recycled or reclaimed raw materials. In fiscal 2016, the Company recognized $7.3 million of certain Lucent related costs which are reported as a non- GAAP adjustment, including $1.8 million in litigation related costs, in addition to $4.7 million of recurring production and material costs.

"The Lucent matter obviously had a big impact on us in fiscal 2016; however, we do not intend to speak to this issue going forward unless something significant changes," said Joseph M. Gingo, chairman, president and chief executive officer, "We believe that the sellers are responsible to compensate us for the damages that the Company has experienced or may incur. As previously stated, we have filed a lawsuit and are pursuing it aggressively."

Asset Impairment
A $401.7 million non-cash charge was recorded in the fourth quarter, as a result of the Company's annual goodwill impairment tests and the discontinued use of certain intangible assets. Management concluded that the carrying value of the goodwill and intangibles primarily associated with the USCAN Engineered Plastics and Engineered Composites reporting units exceeded their respective estimated fair values. The goodwill impairment resulted from a combination of items, including the fraudulent activity discovered at Citadel's Lucent subsidiary, as well as a sharply lowered outlook for oil field service activity and other factors that reduced the long-term outlook for these businesses. The impairment of intangibles reduced the amortization expense in the fourth quarter of fiscal 2016 by $1.2 million, or $0.03 per share, and will reduce amortization expense in fiscal 2017 by $4.8 million or $0.12 cents per share.

Business Outlook
"As I've said previously, the Board is not satisfied with the Company's performance and the pace of execution throughout fiscal 2016," said Gingo. "Over the past two months as chief executive officer, I've led our internal team and our outside advisors in a thorough review of every aspect of our business in order to verify our market intelligence, refine our vision and improve our execution. I believe we have a clear and realistic path forward to restore and reset A. Schulman's operational and financial performance worldwide to the sustainable levels our shareholders previously realized and rightfully expect of us."

The Company will outline growth and profitability objectives at its upcoming Investor Day on November 16, 2016 in New York City. At this event, management will provide operational details underpinning its fiscal 2017 adjusted net income guidance range of $2.08 to $2.18 per diluted share, as well as provide its long-term outlook for A. Schulman.

Conference Call on the Web
A live Internet broadcast of A. Schulman's conference call regarding fiscal 2016 fourth-quarter earnings can be accessed at 9:00 a.m. Eastern Time on October 27, 2016, on the Company's website, www.aschulman.com. An archived replay of the call will also be available on the website.

Investor Presentation Materials
Senior executives may participate in meetings with analysts and investors throughout the fiscal year. The Company has posted presentation materials, portions of which may be used during such meetings, in the Investors section of its website at www.aschulman.com. The presentation will remain on the website as long as it is in use.

About A. Schulman, Inc.
A. Schulman, Inc. is a leading international supplier of high-performance plastic compounds and resins headquartered in Akron, Ohio. Since 1928, the Company has been providing innovative solutions to meet its customers' demanding requirements. The Company's customers span a wide range of markets such as packaging, mobility, building & construction, electronics & electrical, agriculture, personal care & hygiene, sports, leisure & home, custom services and others. The Company employs approximately 4,800 people and has 54 manufacturing facilities globally. A. Schulman reported net sales of approximately $2.5 billion for the fiscal year ended August 31, 2016. Additional information about A. Schulman can be found at www.aschulman.com.

Use of Non-GAAP Financial Measures
This release includes certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States ("GAAP"). These non-GAAP financial measures include segment gross profit, SG&A expenses excluding certain items, segment operating income, operating income before certain items, net income excluding certain items, net income per diluted share excluding certain items and adjusted EBITDA, as discussed further in the Reconciliation of GAAP and Non-GAAP Financial Measures below. These non-GAAP financial measures are considered relevant to aid analysis and understanding of the Company's results and business trends. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures, and tables included in this release reconcile each non-GAAP financial measure with the most directly comparable GAAP financial measure. The most directly comparable GAAP financial measures for these purposes are gross profit, SG&A expenses, operating income, net income and net income per diluted share. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.

While the Company believes that these non-GAAP financial measures provide useful supplemental information to investors, there are very significant limitations associated with their use. These non-GAAP financial measures are not prepared in accordance with GAAP, may not be reported by all of the Company's competitors and may not be directly comparable to similarly titled measures of the Company's competitors due to potential differences in the exact method of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

Cautionary Statements
A number of the matters discussed in this document that are not historical or current facts deal with potential future circumstances and developments and may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts and relate to future events and expectations. Forward-looking statements contain such words as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements are based on management's current expectations and include known and unknown risks, uncertainties and other factors, many of which management is unable to predict or control, that may cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company's future financial performance, include, but are not limited to, the following:

  • worldwide and regional economic, business and political conditions, including continuing economic uncertainties in some or all of the Company's major product markets or countries where the Company has operations;
  • the effectiveness of the Company's efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques;
  • competitive factors, including intense price competition;
  • fluctuations in the value of currencies in areas where the Company operates;
  • volatility of prices and availability of the supply of energy and raw materials that are critical to the manufacture of the Company's products, particularly plastic resins derived from oil and natural gas;
  • changes in customer demand and requirements;
  • effectiveness of the Company to achieve the level of cost savings, productivity improvements, growth and other benefits anticipated from acquisitions and the integration thereof, joint ventures and restructuring initiatives;
  • escalation in the cost of providing employee health care;
  • uncertainties regarding the resolution of pending and future litigation and other claims;
  • the performance of the global automotive market as well as other markets served;
  • further adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products;
  • operating problems with our information systems as a result of system security failures such as viruses, cyber-attacks or other causes;
  • our current debt position could adversely affect our financial health and prevent us from fulfilling our financial obligations;
  • integration of acquisitions, including most recently Citadel, with our existing business, including the risk that the integration will be more costly or more time consuming and complex or simply less effective than anticipated;
  • our ability to achieve the anticipated synergies, cost savings and other benefits from the Citadel acquisition;
  • substantial time devoted by management to the integration of the Citadel acquisition; and
  • failure of counterparties to perform under the terms and conditions of contractual arrangements, including suppliers, customers, buyers and sellers of a business and other third parties with which the Company contracts.

The risks and uncertainties identified above are not the only risks the Company faces. Additional risk factors that could affect the Company's performance are set forth in ITEM 1A, RISK FACTORS, of this Annual Report on Form 10-K. In addition, risks and uncertainties not presently known to the Company or that it believes to be immaterial also may adversely affect the Company. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on the Company's business, financial condition and results of operations.

SHLM_ALL

 

 


A. SCHULMAN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



Three months ended August 31,


Year ended August 31,


2016


2015


2016


2015


Unaudited

(In thousands, except per share data)

Net sales

$

604,586



$

674,019



$

2,496,005



$

2,392,225


Cost of sales

507,893



568,684



2,095,085



2,031,215


Selling, general and administrative expenses

74,243



80,762



296,725



276,244


Restructuring expense

3,763



3,808



11,768



14,338


Asset impairment

401,667





401,667




Operating income (loss)

(382,980)



20,765



(309,240)



70,428


Interest expense

13,583



15,325



54,548



22,613


Bridge financing fees







18,750


Foreign currency transaction (gains) losses

1,420



266



3,491



3,363


Other (income) expense, net

(528)



(538)



(774)



(1,438)


Gain on early extinguishment of debt







(1,290)


Income (loss) from continuing operations before taxes

(397,455)



5,712



(366,505)



28,430


Provision (benefit) for U.S. and foreign income taxes

(12,716)



(18,302)



(8,640)



499


Income (loss) from continuing operations

(384,739)



24,014



(357,865)



27,931


Income (loss) from discontinued operations, net of tax

1,578



(47)



1,861



(133)


Net income (loss)

(383,161)



23,967



(356,004)



27,798


Noncontrolling interests

(43)



(279)



(1,118)



(1,169)


Net income (loss) attributable to A. Schulman, Inc.

(383,204)



23,688



(357,122)



26,629


Convertible special stock dividends

1,875



1,875



7,500



2,438


Net income (loss) available to A. Schulman, Inc. common stockholders

$

(385,079)



$

21,813



$

(364,622)



$

24,191










Weighted-average number of shares outstanding:








Basic

29,347



29,220



29,300



29,149


Diluted

29,347



29,486



29,300



29,483










Basic earnings per share available to A. Schulman, Inc. common stockholders







Income (loss) from continuing operations

$

(13.18)



$

0.75



$

(12.51)



$

0.83


Income (loss) from discontinued operations

$

0.06



$



$

0.07



$


Net income (loss) available to A. Schulman, Inc. common stockholders

$

(13.12)



$

0.75



$

(12.44)



$

0.83










Diluted earnings per share available to A. Schulman, Inc. common stockholders







Income (loss) from continuing operations

$

(13.18)



$

0.75



$

(12.51)



$

0.83


Income (loss) from discontinued operations

$

0.06



$

(0.01)



$

0.07



$

(0.01)


Net income (loss) available to A. Schulman, Inc. common stockholders

$

(13.12)



$

0.74



$

(12.44)



$

0.82










Cash dividends per common share

$

0.205



$

0.205



$

0.820



$

0.820


Cash dividends per share of convertible special stock

$

15.00



$

14.50



$

60.00



$

14.50


 

 

 


A. SCHULMAN, INC.

CONSOLIDATED BALANCE SHEETS



August 31,
 2016


August 31,
 2015


Unaudited

(In thousands)

ASSETS

Current assets:




Cash and cash equivalents

$

35,260



$

96,872


Restricted cash

8,143




Accounts receivable, net

376,786



413,943


Inventories

263,617



317,328


Prepaid expenses and other current assets

40,263



60,205


Total current assets

724,069



888,348


Property, plant and equipment, at cost:




Land and improvements

32,957



31,674


Buildings and leasehold improvements

184,291



164,759


Machinery and equipment

447,932



427,183


Furniture and fixtures

34,457



34,393


Construction in progress

20,431



23,866


Gross property, plant and equipment

720,068



681,875


Accumulated depreciation

405,246



367,381


Net property, plant and equipment

314,822



314,494


Deferred charges and other noncurrent assets

98,403



90,749


Goodwill

257,773



623,583


Intangible assets, net

362,614



434,537


Total assets

$

1,757,681



$

2,351,711


LIABILITIES AND EQUITY

Current liabilities:




Accounts payable

$

280,060



$

305,385


U.S. and foreign income taxes payable

8,985



4,205


Accrued payroll, taxes and related benefits

47,569



56,192


Other accrued liabilities

67,704



70,824


Short-term debt

25,447



20,710


Total current liabilities

429,765



457,316


Long-term debt

929,591



1,045,349


Pension plans

145,108



117,889


Deferred income taxes

59,013



115,537


Other long-term liabilities

25,844



22,885


Total liabilities

1,589,321



1,758,976


Commitments and contingencies




Stockholders' equity:




Convertible special stock, no par value

120,289



120,289


Common stock, $1 par value, authorized - 75,000 shares, issued - 48,510 shares in 2016 and 48,369 shares in 2015

48,510



48,369


Additional paid-in capital

275,115



274,319


Accumulated other comprehensive income (loss)

(120,721)



(83,460)


Retained earnings

219,039



607,690


Treasury stock, at cost, 19,069 shares in 2016 and 19,077 shares in 2015

(382,963)



(383,121)


Total A. Schulman, Inc.'s stockholders' equity

159,269



584,086


Noncontrolling interests

9,091



8,649


Total equity

168,360



592,735


Total liabilities and equity

$

1,757,681



$

2,351,711


 

 

 


A. SCHULMAN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



Year ended August 31,


2016


2015


Unaudited


(In thousands)

Operating from continuing and discontinued operations:




Net income (loss)

$

(356,004)



$

27,798


Adjustments to reconcile net income to net cash provided from (used in) operating activities:




Depreciation

49,925



37,257


Amortization

39,339



21,983


Deferred tax provision

(37,919)



(19,253)


Pension, postretirement benefits and other compensation

3,516



7,560


Restricted stock compensation - CEO transition costs, net of cash



4,789


Asset impairment

401,667




Changes in assets and liabilities, net of acquisitions:




Accounts receivable

28,227



(2,395)


Inventories

44,627



(17,382)


Accounts payable

(27,465)



(8,139)


Income taxes

12,549



(3,342)


Tax windfall related to share-based incentive compensation



(506)


Accrued payroll and other accrued liabilities

(9,319)



18,359


Other assets and long-term liabilities

(1,016)



(6,559)


Net cash provided from (used in) operating activities

148,127



60,170


Investing from continuing and discontinued operations:




Expenditures for property, plant and equipment

(51,238)



(42,587)


Proceeds from the sale of assets

1,366



1,985


Restricted cash

(8,143)




Investment in equity investees



(12,456)


Business acquisitions, net of cash



(808,258)


Net cash provided from (used in) investing activities

(58,015)



(861,316)


Financing from continuing and discontinued operations:




Cash dividends paid to common stockholders

(24,029)



(24,024)


Cash dividends paid to special stockholders

(7,500)



(1,813)


Increase (decrease) in short-term debt

2,945



(8,759)


Borrowings on long-term debt

244,231



1,430,513


Repayments on long-term debt including current portion

(362,002)



(713,717)


Payment of debt issuance costs



(15,007)


Noncontrolling interests' contributions (distributions)



(1,750)


Tax windfall related to share-based incentive compensation



506


Issuances of common stock, common and treasury

258



289


Issuances of convertible special stock, net



120,289


Redemptions of common stock

(1,139)



(4,999)


Purchases of treasury stock



(3,335)


Net cash provided from (used in) financing activities

(147,236)



778,193


Effect of exchange rate changes on cash

(4,488)



(15,668)


Net increase (decrease) in cash and cash equivalents

(61,612)



(38,621)


Cash and cash equivalents at beginning of year

96,872



135,493


Cash and cash equivalents at end of year

$

35,260



$

96,872






Cash paid during the year for:




Interest

$

54,432



$

11,187


Income taxes

$

22,392



$

22,651


 

 

 

A. SCHULMAN, INC.

Reconciliation of GAAP and Non-GAAP Financial Measures

Unaudited


Three months ended August 31, 2016


Cost of Sales


Gross Margin


SG&A


Restructuring Expense


Asset Impairment


Operating Income (Loss)


Operating Income per Pound


Non Operating (Income) Expense


Income tax expense (benefit)


Net Income (Loss)Available to ASI Common Stockholders


Diluted EPS




(In thousands, except for %'s, per pound and per share data)

As reported


$

507,893



16.0

%


$

74,243



$

3,763



$

401,667



$

(382,980)



$

(0.627)



$

14,475



$

(12,716)



$

(385,079)



$

(13.12)


Certain items:























Asset impairments (1)










(401,667)



401,667







90,375



311,292



10.62


Accelerated depreciation (2)


(1,509)





(4)







1,513







292



1,221



0.04


Costs related to acquisitions & integrations (3)


(247)





(972)







1,219







199



1,020



0.03


Restructuring & related costs (4)


1,249





(5,289)



(3,763)





7,803





1



1,548



6,254



0.22


Lucent costs (5)


(241)





(752)







993







161



832



0.03


Deferred financing fees (6)
















(165)



33



132



0.00

CEO transition costs (7)






(3,399)







3,399







765



2,634



0.09


Tax (benefits) charges (8)


















(77,021)



77,021



2.62


Loss (income) from discontinued operations




















(1,578)



(0.06)


Total certain items


(748)



0.1

%


(10,416)



(3,763)



(401,667)



416,594



0.682



(164)



16,352



398,828



13.59


As Adjusted


$

507,145



16.1

%


$

63,827



$



$



$

33,614



$

0.055



$

14,311



$

3,636



$

13,749



$

0.47


Percentage of Revenue






10.6

%






5.6

%








2.3

%



Effective Tax Rate


















18.8

%




























Three months ended August 31, 2015


Cost of Sales


Gross Margin


SG&A


Restructuring Expense


Asset Impairment


Operating Income


Operating Income per Pound


Non Operating (Income) Expense


Income tax expense (benefit)


Net Income Available to ASI Common Stockholders


Diluted EPS




(In thousands, except for %'s, per pound and per share data)

As reported


$

568,684



15.6

%


$

80,762



$

3,808





$

20,765



$

0.032



$

15,053



$

(18,302)



$

21,813



$

0.74


Certain items:























Accelerated depreciation (2)


(81)











81







28



53




Costs related to acquisitions & integrations (3)


(93)





(9,143)







9,236





(80)



116



9,200



0.31


Restructuring & related costs (4)


(1,041)





(3,259)



(3,808)





8,108







1,181



6,927



0.23


Inventory step-up (9)


(2,741)











2,741







110



2,631



0.09


Acquisition-related interest (10)
















(1,312)



122



1,190



0.05


Tax (benefits) charges (8)


















23,106



(23,106)



(0.78)


Loss (income) from discontinued operations




















47




Total certain items


(3,956)



0.6

%


(12,402)




(3,808)






20,166



0.031



(1,392)



24,663



(3,058)



(0.10)


As Adjusted


$

564,728



16.2

%


$

68,360



$



$



$

40,931



$

0.063



$

13,661



$

6,361



$

18,755



$

0.64


Percentage of Revenue






10.1

%






6.1

%








2.8

%



Effective Tax Rate


















23.3

%




















































 

 

 

A. SCHULMAN, INC.

Reconciliation of GAAP and Non-GAAP Financial Measures, (continued)


Year Ended August 31, 2016


Cost of Sales


Gross Margin


SG&A


Restructuring Expense


Asset Impairment


Operating Income (Loss)


Operating Income per Pound


Non Operating (Income) Expense


Income tax expense (benefit)


Net Income (Loss)Available to ASI Common Stockholders


Diluted EPS




(In thousands, except for %'s, per pound and per share data)

As reported


$

2,095,085



16.1

%


$

296,725



$

11,768



$

401,667



$

(309,240)



$

(0.124)



$

57,265



$

(8,640)



$

(364,622)



$

(12.44)


Certain items:























Asset impairments (1)










(401,667)



401,667







90,375



311,292



10.59


Accelerated depreciation (2)


(6,288)





(21)







6,309







1,420



4,889



0.17


Costs related to acquisitions & integrations (3)


(2,769)





(6,020)







8,789







1,978



6,811



0.24


Restructuring & related costs (4)


(1,283)





(14,711)



(11,768)





27,762





(770)



6,420



22,113



0.76


Lucent costs (5)


(2,085)





(5,176)







7,261







1,634



5,627



0.19


Deferred financing fees (6)
















(600)



135



465



0.02


CEO transition costs (7)






(3,399)







3,399







765



2,634



0.09


Tax (benefits) charges (8)


















(73,824)



73,824



2.53


Loss (income) from discontinued operations




















(1,861)



(0.07)


Total certain items


(12,425)



0.5

%


(29,327)



(11,768)



(401,667)



455,187



0.182



(1,370)



28,903



425,794



14.52


As Adjusted


$

2,082,660



16.6

%


$

267,398



$



$



$

145,947



$

0.058



$

55,895



$

20,263



$

61,172



$

2.08


Percentage of Revenue






10.7

%






5.8

%








2.5

%



Effective Tax Rate


















22.5

%




























Year Ended August 31, 2015


Cost of Sales


Gross Margin


SG&A


Restructuring Expense


Asset Impairment


Operating Income


Operating Income per Pound


Non Operating (Income) Expense


Income tax expense (benefit)


Net Income Available to ASI Common Stockholders


Diluted EPS




(In thousands, except for %'s, per pound and per share data)

As reported


$

2,031,215



15.1

%


$

276,244



$

14,338



$



$

70,428



$

0.031



$

41,998



$

499



$

24,191



$

0.82


Certain items:























Accelerated depreciation (2)


(408)











408







28



380



0.01


Costs related to acquisitions & integrations (3)


(267)





(16,941)







17,208





(81)



417



16,872



0.57


Restructuring and related costs (4)


(1,388)





(7,685)



(14,338)





23,411







4,335



19,076



0.65


Gain on early extinguishment of debt (11)
















1,290



(427)



(863)



(0.03)


CEO transition costs (7)






(6,167)







6,167









6,167



0.21


Inventory step-up (9)


(3,082)











3,082







212



2,870



0.10


Acquisition-related interest (10)
















(20,445)



121



20,324



0.69


Tax (benefits) charges (8)


















19,265



(19,265)



(0.65)


Loss (income) from discontinued operations




















133




Total certain items


(5,145)



0.2

%


(30,793)




(14,338)






50,276



0.023



(19,236)



23,951



45,694



1.55


As Adjusted


$

2,026,070



15.3

%


$

245,451



$



$



$

120,704



$

0.054



$

22,762



$

24,450



$

69,885



$

2.37


Percentage of Revenue






10.3

%






5.0

%








2.9

%



Effective Tax Rate


















25.0

%




















































 

1 - Asset impairments are related to goodwill and intangible assets, and also include information technology assets, in the Company's USCAN, EC and EMEA segments.  Refer to Note 4 and Note 19 of the 2016 Annual Report on Form 10-K for further discussion.

2 - Accelerated depreciation is related to restructuring plans in the Company's USCAN, LATAM and EMEA segments. Refer to Note 14 of the 2016 Annual Report on Form 10-K for further discussion.

3 - Costs related to acquisitions and integrations primarily include third party professional, legal, IT and other expenses associated with successful and unsuccessful full or partial acquisition and divestiture/dissolution transactions, as well as certain employee-related expenses such as travel, bonuses and post-acquisition severance separate from a formal restructuring plan.

4 - Restructuring and related costs include items such as employee severance charges, lease termination charges, curtailment gains/losses, other employee termination costs, and professional fees related to the reorganization of the Company's legal entity structure and facility operations.  Refer to Note 16 of the 2016 Annual Report on Form 10-K for further discussion.

5 - Lucent costs primarily represent legal and investigation costs related to resolving the Lucent matter, product manufacturing costs for reworking existing Lucent inventory, obsolete Lucent inventory reserve costs, and dedicated internal personnel costs that would have otherwise been focused on normal operations.

6 - Accelerated amortization of deferred financing costs related to the €108.6 million prepayment of the Euro Term Loan B.

7 - CEO transition costs in 2016 represent charges for deferred compensation granted to Bernard Rzepka.  Costs in 2015 represent a charge for the modification and accelerated vesting upon retirement of the outstanding equity compensation awards granted to Joseph M. Gingo in 2013 and 2014.

8 - Tax (benefits) charges represent the Company's adjustment of reported tax expense to non-GAAP tax based on the overall estimated annual non-GAAP effective tax rates.

9 - Inventory step-up costs represent the amortization of adjustments to fair value of inventory acquired for acquisition purchase accounting.

10 - Primarily relates to bridge financing fees and the write-off of deferred debt costs of $18.8 million and $1.5 million, respectively. Refer to Note 5 of the 2016 Annual Report on Form 10-K for further discussion.

11 - Represents a pre-tax net gain of $1.3 million on the early extinguishment of debt

 

A. SCHULMAN, INC.

ADJUSTED EBITDA RECONCILIATION



Three months ended August 31,


Year ended August 31,


2016


2015


2016


2015


Unaudited

(In thousands)









Net income available to A. Schulman, Inc. common stockholders

$

(385,079)



$

21,813



$

(364,622)



$

24,191


     Interest expense and bridge financing fees

13,583



15,325



54,548



41,363


     Provision for U.S. and foreign income taxes

(12,716)



(18,302)



(8,640)



499


     Depreciation and Amortization

21,754



20,860



89,264



59,240


     Noncontrolling interests

43



279



1,118



1,169


     Convertible special stock dividends

1,875



1,875



7,500



2,438


     Other (1)

892



(272)



2,717



635


EBITDA, as calculated

$

(359,648)



$

41,578



$

(218,115)



$

129,535


     Non-GAAP Adjustments (2)

413,505



20,141



447,006



50,061


EBITDA, as adjusted

$

53,857



$

61,719



$

228,891



$

179,596










 

(1) - Other includes Foreign currency transaction (gains) losses, Other (income) expense, net, and Gain on early extinguishment of debt.

(2) - For details on Non-GAAP adjustments, refer to "Reconciliation of GAAP and Non-GAAP Financial Measures", items (1), (3) - (11) and Loss (income) from discontinued operations.  Amounts are included in Operating Income (Loss) and Loss (income) from discontinued operations. Accelerated depreciation on the "Reconciliation of GAAP and Non-GAAP Financial Measures" has been excluded as it is already included in Depreciation and Amortization above.


 

 

A. SCHULMAN, INC.

SUPPLEMENTAL SEGMENT INFORMATION




Net Sales


Pounds Sold



Three months ended August 31,

EMEA


2016


2015


$ Change


% Change


2016


2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom Performance Colors


$

29,324



$

29,253



$

71



0.2

%


11,907



11,768



139



1.2

%

Masterbatch Solutions


96,076



100,787



(4,711)



(4.7)

%


97,260



99,920



(2,660)



(2.7)

%

Engineered Plastics


91,064



96,201



(5,137)



(5.3)

%


72,312



70,895



1,417



2.0

%

Specialty Powders


31,866



40,062



(8,196)



(20.5)

%


38,682



43,576



(4,894)



(11.2)

%

Distribution Services


50,839



60,460



(9,621)



(15.9)

%


78,059



78,873



(814)



(1.0)

%

Total EMEA


$

299,169



$

326,763



$

(27,594)



(8.4)

%


298,220



305,032



(6,812)



(2.2)

%




















Net Sales


Pounds Sold



Three months ended August 31,

USCAN


2016


2015


$ Change


% Change


2016


2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom Performance Colors


$

9,028



$

12,734



$

(3,706)



(29.1)

%


3,502



4,358



(856)



(19.6)

%

Masterbatch Solutions


29,348



37,033



(7,685)



(20.8)

%


42,073



53,061



(10,988)



(20.7)

%

Engineered Plastics


84,272



104,158



(19,886)



(19.1)

%


88,033



101,198



(13,165)



(13.0)

%

Specialty Powders


23,044



22,692



352



1.6

%


32,838



33,776



(938)



(2.8)

%

Distribution Services


13,240



18,655



(5,415)



(29.0)

%


16,697



23,403



(6,706)



(28.7)

%

Total USCAN


$

158,932



$

195,272



$

(36,340)



(18.6)

%


183,143



215,796



(32,653)



(15.1)

%




















Net Sales


Pounds Sold



Three months ended August 31,

LATAM


2016


2015


$ Change


% Change


2016


2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom Performance Colors


$

1,547



$

1,129



$

418



37.0

%


583



488



95



19.5

%

Masterbatch Solutions


23,908



25,232



(1,324)



(5.2)

%


18,833



17,895



938



5.2

%

Engineered Plastics


12,296



11,363



933



8.2

%


10,240



9,137



1,103



12.1

%

Specialty Powders


7,161



7,604



(443)



(5.8)

%


7,731



7,607



124



1.6

%

Distribution Services








N/A









N/A


Total LATAM


$

44,912



$

45,328



$

(416)



(0.9)

%


37,387



35,127



2,260



6.4

%




















Net Sales


Pounds Sold



Three months ended August 31,

APAC


2016


2015


$ Change


% Change


2016


2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom Performance Colors


$

2,903



$

2,544



$

359



14.1

%


2,376



2,826



(450)



(15.9)

%

Masterbatch Solutions


20,944



20,070



874



4.4

%


24,245



20,907



3,338



16.0

%

Engineered Plastics


24,358



25,433



(1,075)



(4.2)

%


19,192



20,444



(1,252)



(6.1)

%

Specialty Powders


986



1,148



(162)



(14.1)

%


1,065



1,195



(130)



(10.9)

%

Distribution Services


85



328



(243)



(74.1)

%


83



506



(423)



(83.6)

%

Total APAC


$

49,276



$

49,523



$

(247)



(0.5)

%


46,961



45,878



1,083



2.4

%


















 

 

A. SCHULMAN, INC.

SUPPLEMENTAL SEGMENT INFORMATION




Net Sales


Pounds Sold



Year ended August 31,

EMEA


2016


2015


$ Change


% Change


2016


2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom Performance Colors


$

125,897



$

131,565



$

(5,668)



(4.3)

%


51,331



50,088



1,243



2.5

%

Masterbatch Solutions


401,750



412,501



(10,751)



(2.6)

%


402,153



392,522



9,631



2.5

%

Engineered Plastics


370,512



391,406



(20,894)



(5.3)

%


286,719



278,038



8,681



3.1

%

Specialty Powders


136,379



154,701



(18,322)



(11.8)

%


163,152



177,618



(14,466)



(8.1)

%

Distribution Services


205,425



249,182



(43,757)



(17.6)

%


315,939



354,973



(39,034)



(11.0)

%

Total EMEA


$

1,239,963



$

1,339,355



$

(99,392)



(7.4)

%


1,219,294



1,253,239



(33,945)



(2.7)

%




















Net Sales


Pounds Sold



Year ended August 31,

USCAN


2016


2015


$ Change


% Change


2016


2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom Performance Colors


$

39,040



$

44,258



$

(5,218)



(11.8)

%


14,426



15,099



(673)



(4.5)

%

Masterbatch Solutions


128,001



156,541



(28,540)



(18.2)

%


187,174



213,413



(26,239)



(12.3)

%

Engineered Plastics


379,184



245,004



134,180



54.8

%


378,408



191,150



187,258



98.0

%

Specialty Powders


88,540



94,265



(5,725)



(6.1)

%


124,848



145,159



(20,311)



(14.0)

%

Distribution Services


56,604



70,425



(13,821)



(19.6)

%


73,244



79,890



(6,646)



(8.3)

%

Total USCAN


$

691,369



$

610,493



$

80,876



13.2

%


778,100



644,711



133,389



20.7

%




















Net Sales


Pounds Sold



Year ended August 31,

LATAM


2016


2015


$ Change


% Change


2016


2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom Performance Colors


$

5,245



$

4,586



$

659



14.4

%


1,964



1,834



130



7.1

%

Masterbatch Solutions


92,057



91,204



853



0.9

%


71,792



64,211



7,581



11.8

%

Engineered Plastics


44,466



46,220



(1,754)



(3.8)

%


36,703



34,912



1,791



5.1

%

Specialty Powders


29,882



35,453



(5,571)



(15.7)

%


33,622



31,064



2,558



8.2

%

Distribution Services








N/A









N/A


Total LATAM


$

171,650



$

177,463



$

(5,813)



(3.3)

%


144,081



132,021



12,060



9.1

%




















Net Sales


Pounds Sold



Year ended August 31,

APAC


2016


2015


$ Change


% Change


2016


2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom Performance Colors


$

11,556



$

11,044



$

512



4.6

%


9,441



8,636



805



9.3

%

Masterbatch Solutions


79,131



81,108



(1,977)



(2.4)

%


89,266



81,807



7,459



9.1

%

Engineered Plastics


92,411



104,628



(12,217)



(11.7)

%


75,519



76,251



(732)



(1.0)

%

Specialty Powders


3,336



9,809



(6,473)



(66.0)

%


3,576



10,279



(6,703)



(65.2)

%

Distribution Services


477



1,192



(715)



(60.0)

%


686



1,569



(883)



(56.3)

%

Total APAC


$

186,911



$

207,781



$

(20,870)



(10.0)

%


178,488



178,542



(54)



%






















































Net Sales


Pounds Sold



Three months ended August 31,

Consolidated


2016


2015


$ Change


% Change


2016


2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom Performance Colors


$

42,802



$

45,660



$

(2,858)



(6.3)

%


18,368



19,440



(1,072)



(5.5)

%

Engineered Composites


52,297



57,133



(4,836)



(8.5)

%


44,782



46,082



(1,300)



(2.8)

%

Masterbatch Solutions


170,276



183,122



(12,846)



(7.0)

%


182,411



191,783



(9,372)



(4.9)

%

Engineered Plastics


211,990



237,155



(25,165)



(10.6)

%


189,777



201,674



(11,897)



(5.9)

%

Specialty Powders


63,057



71,506



(8,449)



(11.8)

%


80,316



86,154



(5,838)



(6.8)

%

Distribution Services


64,164



79,443



(15,279)



(19.2)

%


94,839



102,782



(7,943)



(7.7)

%

Total Consolidated


$

604,586



$

674,019



$

(69,433)



(10.3)

%


610,493



647,915



(37,422)



(5.8)

%




















Net Sales


Pounds Sold



Year ended August 31,

Consolidated


2016


2015


$ Change


% Change


2016


2015


Lbs. Change


% Change



(In thousands, except for %'s)

Custom Performance Colors


$

181,738



$

191,453



$

(9,715)



(5.1)

%


77,162



75,657



1,505



2.0

%

Engineered Composites


206,112



57,133



148,979



N/A



175,120



46,082



129,038



N/A


Masterbatch Solutions


700,939



741,354



(40,415)



(5.5)

%


750,385



751,953



(1,568)



(0.2)

%

Engineered Plastics


886,573



787,258



99,315



12.6

%


777,349



580,351



196,998



33.9

%

Specialty Powders


258,137



294,228



(36,091)



(12.3)

%


325,198



364,120



(38,922)



(10.7)

%

Distribution Services


262,506



320,799



(58,293)



(18.2)

%


389,869



436,432



(46,563)



(10.7)

%

Total Consolidated


$

2,496,005



$

2,392,225



$

103,780



4.3

%


2,495,083



2,254,595



240,488



10.7

%

 

 

 


A. SCHULMAN, INC.

SUPPLEMENTAL SEGMENT INFORMATION

(continued)




Three months ended August 31,


Year ended August 31,



2016


2015


2016


2015



Unaudited

(In thousands, except for %'s)










Segment gross profit









EMEA


$

41,887



$

43,952



$

178,376



$

189,860


USCAN


25,234



34,072



115,329



100,550


LATAM


9,660



9,896



36,886



31,971


APAC


8,140



6,835



32,293



29,238


EC


12,520



14,536



50,461



14,536


Total segment gross profit


97,441



109,291



413,345



366,155


Inventory step-up




(2,741)





(3,082)


Accelerated depreciation and restructuring related costs


(260)



(1,122)



(7,571)



(1,796)


Costs related to acquisitions


(247)



(93)



(2,769)



(267)


Lucent costs


(241)





(2,085)




Total gross profit


$

96,693



$

105,335



$

400,920



$

361,010











Segment operating income









EMEA


$

17,429



$

17,281



$

76,576



$

78,313


USCAN


8,896



15,414



47,062



40,713


LATAM


5,687



5,530



20,268



13,061


APAC


4,436



3,498



17,953



14,401


EC


4,302



5,454



14,885



5,454


Total segment operating income


40,750



47,177



176,744



151,942


Corporate


(7,136)



(6,246)



(30,797)



(31,238)


Costs related to acquisitions and integrations


(1,219)



(9,236)



(8,789)



(17,208)


Restructuring and related costs


(7,803)



(8,108)



(27,762)



(23,411)


Accelerated depreciation


(1,513)



(81)



(6,309)



(408)


CEO transition costs


(3,399)





(3,399)



(6,167)


Asset impairment


(401,667)





(401,667)




Lucent costs


(993)





(7,261)




Inventory step-up




(2,741)





(3,082)


Operating income (loss)


(382,980)



20,765



(309,240)



70,428


Interest expense


(13,583)



(15,325)



(54,548)



(22,613)


Bridge financing fees








(18,750)


Foreign currency transaction gains (losses)


(1,420)



(266)



(3,491)



(3,363)


Other income (expense), net


528



538



774



1,438


Gain on early extinguishment of debt








1,290


Income (loss) from continuing operations before taxes


$

(397,455)



$

5,712



$

(366,505)



$

28,430











Capacity Utilization









EMEA


78

%


83

%


81

%


87

%

USCAN


62

%


70

%


66

%


66

%

LATAM


64

%


81

%


70

%


73

%

APAC


71

%


61

%


67

%


64

%

EC


70

%


72

%


69

%


72

%

Worldwide


69

%


75

%


72

%


75

%

 

 

 

A. SCHULMAN, INC.

Sales by Geographical Region




Three months ended August 31, 2016



Unaudited (In thousands, except for %'s)

 



Thermoplastics


Engineered Composites


Total

Geographical Region


Sales by Region


% of TP


Sales by Region


% of EC


Total Sales


Total %

United States / Canada


$

158,932



28.8

%


$

36,829



70.5

%


$

195,761



32.4

%


Europe


299,169



54.2

%


5,724



10.9

%


304,893



50.4

%


Mexico / South America


44,912



8.1

%


9,744



18.6

%


54,656



9.0

%


Asia Pacific


49,276



8.9

%




%


49,276



8.2

%


Total


$

552,289



100.0

%


$

52,297



100.0

%


$

604,586



100.0

%

















Three months ended August 31, 2015



Unaudited (In thousands, except for %'s)

 



Thermoplastics


Engineered Composites


Total

Geographical Region


Sales by Region


% of TP


Sales by Region


% of EC


Total Sales


Total %

United States / Canada


$

195,272



31.7

%


$

41,831



73.2

%


$

237,103



35.2

%


Europe


326,763



53.0

%


5,892



10.3

%


332,655



49.4

%


Mexico / South America


45,328



7.3

%


9,410



16.5

%


54,738



8.1

%


Asia Pacific


49,523



8.0

%




%


49,523



7.3

%


Total


$

616,886



100.0

%


$

57,133



100.0

%


$

674,019



100.0

%







Twelve months ended August 31, 2016



Unaudited (In thousands, except for %'s)

 



Thermoplastics


Engineered Composites


Total

Geographical Region


Sales by Region


% of TP


Sales by Region


% of EC


Total Sales


Total %

United States / Canada


$

691,369



30.2

%


$

147,028



71.3

%


$

838,397



33.6

%


Europe


1,239,963



54.1

%


23,013



11.2

%


1,262,976



50.6

%


Mexico / South America


171,650



7.5

%


36,071



17.5

%


207,721



8.3

%


Asia Pacific


186,911



8.2

%




%


186,911



7.5

%


Total


$

2,289,893



100.0

%


$

206,112



100.0

%


$

2,496,005



100.0

%

















Twelve months ended August 31, 2015



Unaudited (In thousands, except for %'s)

 



Thermoplastics


Engineered Composites


Total

Geographical Region


Sales by Region


% of TP


Sales by Region


% of EC


Total Sales


Total %

United States / Canada


$

610,493



26.1

%


$

41,831



73.2

%


$

652,324



27.3

%


Europe


1,339,355



57.4

%


5,892



10.3

%


1,345,247



56.2

%


Mexico / South America


177,463



7.6

%


9,410



16.5

%


186,873



7.8

%


Asia Pacific


207,781



8.9

%




%


207,781



8.7

%


Total


$

2,335,092



100.0

%


$

57,133



100.0

%


$

2,392,225



100.0

%


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/a-schulman-reports-fiscal-2016-fourth-quarter-full-year-results-300352032.html

SOURCE A. Schulman, Inc.

News Provided by Acquire Media


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